London is leading the UK out of recession despite unemployment continuing to rise at pace in the capital.

Research by Markit today showed the economy grew faster in London than anywhere else in the country last month. Its barometer of activity, where anything above 50 marks growth, hit a 35-month high of 59.6 in the capital in October — up from 55.1 in September and against a UK average of 56.9.

Tim Moore, an economist at Markit, said: “The UK regions continued to take steps along the road to recovery with London leading the way in October. Companies across the UK reported another month of rising output and demand, but generally cautioned that workloads remain well below pre-recession levels.

“As a result, labour market weakness persisted in October, with firms forced to cut jobs in response to excess capacity. Squeezed operating margins remained evident, as input costs increased across all UK regions and strong competition limited pricing power.”

The employment index, which also uses 50 as the cut-off between growth and decline, measured 44.7 in London last month showing jobs continued to be lost.

Official figures published on Wednesday are expected to show unemployment has risen to 2.5 million or 8% in the UK.